Context: The US is India’s top market for agricultural goods, with bilateral farm trade totalling $6.6 billion in 2024. The US has imposed a 26% “reciprocal tariff" on Indian imports. The introduction of a ‘reciprocal tariff’ policy may pose certain challenges to agri-exports from India.
Relevance of the Topic:Mains: India-US Agriculture trade- Statistics, Potential, Challenges, Way forward
Key Stats India-US Agri Trade
- Tariff Disparity: Historically, a tariff disparity of 32% has existed between India and the US. India imposes an average 37.7% tariff, while the US applies only 2.6% on agricultural products. A reciprocal tariff policy could impact the trade dynamics between the two countries.
- Bilateral Trade Statistics (2024):
- Total India-US agricultural trade: $6.6 billion
- India’s exports to the US: $5 billion
- US exports to India: $1.5 billion
- India’s Agricultural Imports from the US primarily include Pulses, vegetable oils, tree nuts and Fresh fruits. Tariff changes could disrupt this trade.
Impacts of Tariffs on India’s major Agri-Exports to the US
- Tariffs can hit key agricultural exports, particularly basmati and non-basmati rice, shrimp, wheat, and buffalo meat, which together account for 46% of India’s farm trade with the US.
- Shrimp (India’s largest seafood export to the US) will become un-competitive in the US market. Currently, it is subjected to around 7% duty including countervailing duty and anti-dumping duty. With the increase (26%) in tariff, Indian exporters would be subjected to 33% tariff.
- Tariff hike on processed foods, sugar, and cocoa exports will make Indian snacks and confectionery less attractive to US buyers.
- Dairy products (ghee, butter, and milk powder) would be costlier in the US.
Potential for India’s Agri-Exports to the US:
- India can expand its export portfolio by increasing trade in: Rubber and derivatives; Beverages, spirits, and vinegar; Tobacco; Fish and dairy produce; Cotton.
- GTRI has suggested that to soften the impact, India can propose a 'zero-for-zero' tariff strategy' to the US, under which both countries would mutually eliminate tariffs on select goods rather than negotiating a full bilateral trade agreement.
Indo-Pacific Economic Framework for Prosperity (IPEF)
- Signed in May 2022 between the US and 13 Indo-Pacific countries, including India.
- Aims to: Strengthen food safety and trade standards; Reduce agri-trade barriers for US agricultural exports.
Challenges Hindering India’s Agri-Export Growth
- Logistics and Infrastructure Issues: India’s logistical efficiency improved from 54th in 2014 to 38th in 2023 (World Bank’s Logistics Performance Index). However, India still lags behind countries like Canada, China, South Africa, and Malaysia. Cold storage and supply chain infrastructure remain major bottlenecks.
- High Post-Harvest Losses: 40% of food waste in India due to poor post-harvest management (FAO report). 30% of fruits and vegetables perish due to inadequate storage.
- Stringent Sanitary and Phytosanitary (SPS) Standards: Trade agreements by the US, European Union etc. require adherence to strict environmental and quality regulations. Attaining compliance remains a major issue in increasing exports to these countries.
- Structural Issues in Indian Agriculture: Small and fragmented landholdings reduce economies of scale. Lack of aggregation and processing facilities for small and micro-enterprises results in limited value addition in agricultural produce and makes them less competitive in global markets.
Way Forward for Strengthening India’s Agri-Exports
- Modernising supply chains with improved cold storage and logistics.
- Enhancing compliance with international food safety and environmental regulations.
- Diversifying export products to reduce dependency on a few commodities.
- Strengthening trade agreements to secure preferential access to US markets.
- Supporting small farmers through aggregation models and export incentives.